Tax agents have been urged to apply “an extra bit of thought and extra care” into handling clients’ claims this tax time as ATO scrutiny mounts.

Speaking to Accountants Daily, H&R Block director of tax communication Mark Chapman said that a combination of factors — the publication of the $8.7 billion individual tax gap and a major increase in ATO funding — has created a perfect storm for the Tax Office to come down hard on errant claims this year.

“The ATO has done their research on it and they’ve got this $8.7 billion tax gap figure in their minds, so they’ve got a bit of science behind their suspicions regarding work-related expenses,” Mr Chapman said.

“They’re not just looking at clients, they are profiling tax agents, so if the claims you are putting through are outside the benchmarks for other tax agents, that can increase scrutiny on the agent themselves.

“They risk-profile every tax agent these days and if you fall well outside these benchmark,s then you can expect the Tax Office to turn up on your doorstep and going through your files.”

Mr Chapman, a former senior director at the Tax Office, believes agents can steer clear of any potential scrutiny this tax time by have a firm grasp of the tax law and applying some common sense to claims.

“The ATO sometimes tries to put across this message that they almost expect tax agents to audit their clients before they lodge their returns, and I don’t buy into that at all, but just using your common sense and that feeling about whether something stacks up, and if it doesn’t, ask some questions and take some notes to justify why the claim is being made,” he said.

“If you just put in that extra bit of thought and extra care, that will pay dividends for the client because they won’t be audited and pay dividends for the practice because you won’t get that ATO spotlight on you for making incorrect excessive claims.”

Mr Chapman also believes it might be prudent to turn away clients who are aggressive with their claims.

“Sometimes clients come into the office and are very forceful about what they want to claim, very forceful about what they are entitled to, and if you don’t put the claim through they will go somewhere else,” Mr Chapman said.

“If a client takes that attitude then, unfortunately, you might have to prepare to tell them to go and find someone else because you don’t think these claims stack up.

“A lot of it comes down to understanding the basics of tax law, and secondly, it comes down to the common sense understanding of what claims stack up and what don’t.”